Relevant and even prescient commentary on news, politics and the economy.

China? Thumbs Up or Thumbs Down?

What happens to a huge and impoverished that country relies on exports when a worldwide depression hits, especially if that country is totalitarian with a ripe history of riots? According to Gerald Warner writing in the ScotlandonSunday,

In default of a multi-party system, people riot as the only form of protest available to them: in China, rioting is a substitute for elections. The regime no longer has the authority to repress its people, but it refuses to surrender its monopoly of power. That is a fatal situation. Thanks to modern technology, the people of China know what has happened to communist parties elsewhere in the world. If the economy falters seriously, the party will be overthrown and the absence of an alternative government will convulse this massive nation in enduring anarchy

The situation now?

Recent figures show Chinese industrial firms’ profits standing at 2.41 trillion yuan, a 4.9% increase on the year, but this compares with a 36.7% rise over the same period in 2007. The Chinese economy is slowing down inexorably and no matter how many hundreds of billions of dollars it holds in US bonds, that will not prevent massive unemployment and social unrest.

The complacent orthodoxy a year ago was that China could ride out a recession even over two years because of the size of its internal market. That, however, confuses demographics with markets. Entire provinces are dirt-poor: their populations do not have the disposable income to compensate for the loss of exports. The extremes of wealth are extravagant. This is a communist country in which wealth is concentrated in the hands of a small minority, while the poor remain not only impoverished but, increasingly, uprooted. The flow of hundreds of millions into cities from the countryside, often evicted by corrupt property developers in concert with party officials, is a ticking time-bomb.

Even over the past decade, regarded as a time of plenty, China was in a state of undeclared anarchy. In 1994 there were 8,700 “mass incidents” (ie riots involving thousands of people); by 2005 there were 87,000 riots, since when the government has stopped publishing the data. In 2003 alone, three million people were involved in riots. This in a one-party state that prides itself – or formerly did – on enforcing strict Leninist social control. [Italics mine.]

I have often taken the “complacent” position that China is well situated to ride out the coming storm. It is flush with cash. When the recovery hits, it will be back to business as usual: Rely on exports for the on-going big leap forward. The alternative scenario–a real Chinese crash–is equally plausible if we have a depression lasting a couple of years.

If a recovery of sorts does miraculously occur and China reverts to export business as usual, then that recovery will be temporary, for its vast export machine will drive the world under water–an on-going cycle. I have often likened the U.S. as a slinky, churning its way down the stairs. After hitting one stair, it seems to be rising again; but, alas, only to dip further down. Given our past history of exuberance, I see no cause to alter this view, even with the charismatic Obama at the helm.

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Symbolman: Dangerous lunatic or prophet before his time?

by Bruce Webb
Back in the day even to hint at some of the subjects of Symbolman’s brilliant flash productions was to mark you as being infected with Bush Derangement Syndrome (BDS). But now in the waning days of Bush/Cheney maybe it is time to push back against the revisionism. Warning if you ever supported Bush or this war you probably need to use your scroll bar. RIGHT NOW. Because I guarantee you are not going to feel comfortable with any of this content.

Army of One If you can watch this without tearing up you may not have any heart at all. Note that this is copyright 2003 before we had any hint that the Walter Reed situation would exist. ‘Support the Troops’? My ass.

Bush no Nazi. A little edgier, but like all of Symbolman’s work fully documented. And also well scored, in this case with Spike Jones. Chorus: “When the fuhrer says we are the master race, sieg heil, sieg heil right in the fuhrer’s face!” In any event pretty illuminating about the source of the Bush family fortune.

Triumph of the Wimp. Whatever you do stick it out to the second half with the soundtrack of ‘Fortunate Son’. Which if it wasn’t written with Bush in mind certainly could have been.

And for people tragically stuck in print mode it is worth reviewing this Onion article published days before the Bush inaugral (Jan 17, 2001). Bush: ‘Our Long National Nightmare Of Peace And Prosperity Is Finally Over’ Boy Howdy. Key paras?

During the 40-minute speech, Bush also promised to bring an end to the severe war drought that plagued the nation under Clinton, assuring citizens that the U.S. will engage in at least one Gulf War-level armed conflict in the next four years.

“You better believe we’re going to mix it up with somebody at some point during my administration,” said Bush, who plans a 250 percent boost in military spending. “Unlike my predecessor, I am fully committed to putting soldiers in battle situations. Otherwise, what is the point of even having a military?”

Shortest verse in the Bible? ‘Jesus wept’. (John 11:35)

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Never turn down ad revenue


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…this new multimedia report, The 25% Cash Machine, will show you, step-by-step, how to get started today. It will take you from the basics of strategic high-income investing right through some of the very best investments to own right now.


* How the rich get richer: The secret of the “25% Cash Machine.”
* How to safely earn high income – 9%-11% – by benefiting from the risks that other investors take.

Found on Bloomberg’s website. Link not provided out of respect for the publication.

I do not not think it takes big brass cajones to keep the scam going…from my contact with scams, all that is really necessary is to keep the offer on the table, and see who clicks on. From Spielberg and Madoff to the lowest paid ‘union’ worker’s mortgage’, scams are plentiful and in an ‘ordinary’ persons ability to implement without significant remorse.

Usually we associate reason and thinking with effort and discipline. Passion is such an unruly emotion that we tend to excuse it from reason, but is necessary for our survival. Certainly passion is the only reason that Angry Bear exists.

Which brings me to an associated question…why are moral arguments posed in the framework of disdain by some people? Defined as “you are not, I am” in an arrested developmental view of the world. The ability for empathy comes late in life…does it also take effort and discipline to achieve? Not reined in, but refined and honed to sharpness.

End of ramble.

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What was the Nexus?

(Update. Not that it matters much at this point but I fixed the link to the Letter to President Clinton. BW 1/3/09)

No I am not asking about a car or misspelling LexisNexis or even talking about a new sequel to the Matrix. It is instead the question to be applied to the following list of names?

Jeb Bush, Dick Cheney and then in alphabetical order:

Elliott Abrams Richard L. Armitage Gary Bauer William J. Bennett

Jeffrey Bergner John Bolton Eliot Cohen Midge Decter Paula Dobriansky Steve Forbes

Aaron Friedberg Francis Fukuyama Frank Gaffney Fred C. Ikle Donald Kagan Robert Kagan Zalmay Khalilzad

William Kristol I. Lewis Libby Richard Perle Norman Podhoretz Dan Qualye Peter W. Rodman Stephen P. Rosen

Henry S. Rowen Donald Rumsfeld William Schneider, Jr. Vin Weber George Weigel Paul Wolfowitz

The answer is below the fold.
Is it a cross section of Republican leadership? Well no, not now and not when the list was compiled. In particular there are very few actual politicians on the list, if by politicians we mean people who ran for office and won.

Is it a list of people who served in the Reagan Administration in foreign policy positions or under Bush I? Well no, though you are getting close. Because some of these people have never to my knowledge had a formal position in government at all.

And while pretty much the entire top tier of the Bush II official security apparatus is represented (Cheney, Bolton, Rumsfeld, Abrams, Libby, Khalilzad) they far from exhaust the entire list. So that is not it either.

Well then is this list somehow bipartisan? Well no, I don’t think you could find a self-identified Democrat on the list. (Though there are a couple of names I am not immediately familiar with).

No what you have here is the combined signatories (because there is a lot of overlap) of the Project for a New American Century’s Statement of Principles of June 3, 1997 and the PNAC’s Letter to President Clinton of Jan 6, 1998.

As the Bush/Cheney regime winds down there are some ongoing and persistent attempts to shape the historical legacy of both men, and as all agree Iraq is going to be the largest element in that. The standard story being pushed is that Bush was a reluctant warrior pushed into war by bad intelligence and retransigence by Saddam. And moreover that that decision was joined in by the entire center-right including both Clintons, Gore and every Representative and Senator who voted for the AUMF in fall 2002. Well sorry I am here to call bullshit on that one and a look at the Statement and the Letter say why. First from the Statement

We aim to change this. We aim to make the case and rally support for American global leadership.

As the 20th century draws to a close, the United States stands as the world’s preeminent power. Having led the West to victory in the Cold War, America faces an opportunity and a challenge: Does the United States have the vision to build upon the achievements of past decades? Does the United States have the resolve to shape a new century favorable to American principles and interests?

Note what is missing here. There is not a hint of multilateralism in any context other than ‘American global leadership’ and not a suggestion that the goal is to spread democracy or global prosperity or anything else for its own sake. Instead this New Century is to be an unabashedly American Century to further America’s own interests. This is a straight out call for global American hegemony. So how do we get there? Well lets look at the letter.

Given the magnitude of the threat, the current policy, which depends for its success upon the steadfastness of our coalition partners and upon the cooperation of Saddam Hussein, is dangerously inadequate. The only acceptable strategy is one that eliminates the possibility that Iraq will be able to use or threaten to use weapons of mass destruction. In the near term, this means a willingness to undertake military action as diplomacy is clearly failing. In the long term, it means removing Saddam Hussein and his regime from power. That now needs to become the aim of American foreign policy.

We urge you to articulate this aim, and to turn your Administration’s attention to implementing a strategy for removing Saddam’s regime from power. This will require a full complement of diplomatic, political and military efforts. Although we are fully aware of the dangers and difficulties in implementing this policy, we believe the dangers of failing to do so are far greater. We believe the U.S. has the authority under existing UN resolutions to take the necessary steps, including military steps, to protect our vital interests in the Gulf. In any case, American policy cannot continue to be crippled by a misguided insistence on unanimity in the UN Security Council.

. Which translated means ‘screw consultation with our allies, forget complying with our treaty obligations under the UN Charter, we need to take the bastard out using all means necessary’.

Feel free to browse around the rest of the PNAC website. You won’t be able to dodge the conclusion that a certain self-identified group of past national security officials, opinion makers, and selected academics committed themselves in the mid-nineties to an aggressive policy of using unilateral US military force to shape the world in America’s image or at least in America’s interest. Starting with an invasion of Iraq. They were not able to get Clinton to move as aggressively as they liked, and in the aftermath of Bush v. Gore didn’t quite have the public support needed to stage a military invasion of Iraq. Until of course 9/11 intervened.

In any event anyone who thinks this war was in any fundamentally contingent on anything that happened in 2001 needs to review the record. All of these people eagerly signed on to a campaign of Iraq invasion with or without ally or UN agreement four or more years prior to 9/11. And it is hard not to identify these people with those that thought Bush I was too tentative after Gulf War I. These people were itching to get a war on, and Cheney’s appointment to lead the VP search team gave them all the opening they needed. Key team members were installed at high levels in State, Defense and the WH itself and all they were waiting for was an excuse.

A last observation. Note that while the plans may have always included a Bush, George wasn’t the first choice, instead it seems like JEB was going to be the figurehead (or given that he is by all accounts smarter than W, perhaps the actual leader).

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Diabolical Chinese force US spending… ?


Yves Smith said it fast and clear in her response to this part of a series in the NYT explaining the financial woes of the US. Two famous men, Kenneth Rogoff and Ben Bernanke, are given star billing. Yves post is worth reading.

Here are some links to Angry Bear posts on the trade deficit and the current crisis, and the “we did not know until 2005 and too late” tone of the article. China lulled us into spending?? And the rest of the world was not so much? And who was working for US interests as a whole somehow? No one?

Peter Morici

Failed trade policy confessions

Volcker knew what was up”

Collision is policy

There are many more from years ago in the archives.

Update: Barry at Big Picture also ponders

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Socking away more in the bank leaves less for splurging at the mall


The The WSJ gives us this quote:

To be sure, there was a glimmer of positive economic news this week as well, as the Labor Department released figures showing inflation-adjusted consumer spending inched up slightly in November as gas prices fell steeply. The personal savings rate also climbed in November. Socking away more in the bank leaves less for splurging at the mall.

Calculated Risk offered a chart to demonstrate this uptick, and a quick note on retail sales this month suggesting a sharp drop in spending to the tune of 4% excluding gas price drops.

Our own Ken Houghton brought us Tom Toles take on the consumers role in helping the economy. (Yes, the wording is correct, but that is for another post).

What does the information reveal?

1. Finally savings are increasing a bit, which is necessary for capital formation (for us citizens) but offers no short term stimulus.

2. Personal disposable income has dropped in relation to spending, such as lay offs or pending layoffs, less work hours/week now or in the near future.

3. Spending is less because people are paying off debt a bit more instead of charging (or using their cards less and cash more, or buying gold or swiss francs).

4. One can always add a ‘fear’ factor as a rational consumer and banker emotion to instability, but begs the question of “where is the money?” Of course, what does the fact of increasing personal and commercial bankruptcies add to the issue?

Since I have no clear vision of weathering this storm, can we build one?

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Who has "bad credit" when a million Americans file for bankruptcy?

by reader Noni Mausa

Who has “bad credit” when a million Americans file for bankruptcy?

With the air hissing out of the Bush balloon, the ½ to 1 million a year personal bankruptcies for the past decade will certainly not slow down. And the kinds of causes aren’t the sort people will easily be able to restructure their way out of.

The result will be an increase in the numbers of people who have a poor credit rating due to outside events – many of them, like this couple, who soberly did everything right.

That article, from the Belleville News-Democrat, goes on to say, in part:

In November, 100,000 U.S. consumers filed for personal bankruptcy. More than 32 percent of them filed under Chapter 13, which allows debtors to restructure and repay creditors over 36 to 60 months. That’s slightly fewer than the total filings recorded in October but more than 39 percent higher than the number reported in November 2007.

This is happening after Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act, a law enacted in October 2005 to make it more difficult for consumers to file for Chapter 7 bankruptcy, under which most debts are forgiven.

Immediately after the law went into effect, the American Bankruptcy Institute reported consumer bankruptcies dropped from the 2 million reported in 2005 to 617,000 in 2006. The institute, which provides Congress and the public with analysis of bankruptcy issues, has since recorded that total bankruptcies have jumped to more than 850,000 last year and is on pace to exceed 1 million new cases this year.

Also in 2005, researchers at Harvard University completed a study that found that 50 percent of all bankruptcy filings were partly the result of medical expenses. The average out-of-pocket medical debt for those who filed for bankruptcy was $12,000 and that 68 percent of those who filed for bankruptcy had health insurance. The study concluded that every 30 seconds in the United States, someone files for bankruptcy in the aftermath of a serious health problem.

Well, we have been discussing aspects of this problem for quite some time now, but it raises a question in my mind: what sort of economy can serve millions and millions of people with a crappy credit rating.

(Rdan…also see stormy’s post here)

And not just the poor, whose credit is dickey at the best of times. From the same article:

Bankruptcy attorney Bill Mueller .. also has seen a shift in clientele. Once upon a time, bankruptcy was primarily a choice for the poor. Today, he said he has filed for clients from every economic status level.

“I’ve filed for members of the military, ranking officers, clergy, lawyers, doctors and people who make a large income who are still above what they can handle,” he said. “We have some with six-figure incomes.”

Although the new law intended to tighten Chapter 7 regulations, Wulff said he is seeing a rise in Chapter 7 filings versus Chapter 13 filings. He said that before the collapse of the real estate market and credit crisis, about half of the cases had filed under Chapter 7. “Now, with equity no longer in their houses to save, what they are doing is throwing in the towel and filing Chapter 7 and surrendering the house,” he said.

I don’t know how long it takes for people’s credit ratings to grow back – is it still seven years? Meanwhile, a poor credit rating can lose the bankrupt person home and car loans, and interfere with securing new jobs, especially in a tight job market..

How many people are we looking at (Dan here…link to Bankruptcy Action deleted at their request 2/25/2014)?

Year Non-Business

2008 1,004,342

2007 822,950

2006 597,965

2005 2,039,214

2004 1,563,145

2003 1,625,208

2002 1,539,111

Or 9.2 million bankruptcies in the past seven years.

Is this a serious problem? That’s about 5% of working age Americans. Presently about 1.2% of working age Americans are filing each year.

Their debtors suffer, of course, but the filers are crippled by the event, too. And crippled people don’t make good workers or good citizens.

I fiddled a bit with a chart from here, adding the post-2000 numbers (didn’t have 2001 so it is pinked in).

I have more questions and no answers regarding this topic.

For instance, in 2006, ’07 and ’08, what did the million or so people do, who would have previously declared bankruptcy (if my projection is correct)?

What happened in 1980 to begin such a long steady climb in bankruptcies? Such a stable increase points to a systemic cause, I would think.

And what will America do if it’s the norm rather than a rare exception to have a bankruptcy in your past? What are those 5% doing now? Can their bankruptcies be labeled “Bush years” and prorated?

by Noni Mausa

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Former CENTCOM Commander on Iraq: May 2004

(By Bruce Webb. Well it is a slow night. So let me point you to perhaps the strongest indictment of Bush Iraq policy c.2002-2004. By the guy who General Tommy Franks followed into command. Bolding mine).
Gen. Anthony Zinni, USMC, (Ret.) Remarks at CDI Board of Directors Dinner, May 12, 2004

I just came back from giving a lecture at UCLA yesterday, and the lecture was on the Middle East. I tried to … for the students there, step back and take a more strategic view of the Middle East and the issues out there and maybe give them a perception of the problems and issues from the eyes of those that live with it day-to-day, the Arabs, Israelis, all those that make up the peoples of the Middle East.

On the way back I was thinking about what to talk about here and I know Iraq is a hot topic and I thought I would stay with Iraq. And I thought on the airplane about how history is going to record what happened in Iraq, how we got into it, and obviously it’s too early to tell. And oftentimes the outcome defines how history characterizes it.

But I thought about how much has been misconstrued about what has happened so far, especially at a time when I commanded CENTCOM and we were in the process of containing Iraq as part of the policy. And I thought about the mistakes we made, that as Bruce (Blair, President of CDI) said, I’ve commented on before.

And what I thought I would do tonight is go through the ten crucial mistakes to this point that we’ve made. Because I think it helps frame what, in fact, has happened over time … and is going to be the first part of that history. And I will conclude with maybe some thoughts on the way ahead, at least from my point of view.

Full text via the link above. The ten mistakes in bullet form below the fold. But really you have to read the whole thing to see how devastating Gen. Zinni’s case was. And remember this is right back in early 2004 before things really went into the pot.

*I think the first mistake that was made was misjudging the success of containment*

*The second mistake I think history will record is that the strategy was flawed. I couldn’t believe what I was hearing about the benefits of this strategic move. That the road to Jerusalem led through Baghdad, when just the opposite is true, the road to Baghdad led through Jerusalem.*

*The third mistake, I think was one we repeated from Vietnam, we had to create a false rationale for going in to get public support. The books were cooked, in my mind. The intelligence was not there.*

*We failed in number four, to internationalize the effort.*

*I think the fifth mistake was that we underestimated the task. And I think those of us that knew that region, former commanders in chief, I guess we can’t use that term anymore – part of transformation is to change the lexicon – but former combatant commanders of U.S. Central Command, beginning with Gen. Schwarzkopf, have said you don’t understand what you’re getting into. You are not going to go through Edelman’s “cakewalk;” you are not going to go through Chalabi’s dancing in the streets to receive you. You are about to go into a problem that you don’t know the dimensions and the depth of, and are going to cause you a great deal of pain, time, expenditure of resources and casualties down the road.*

*The sixth mistake, and maybe the biggest one, was propping up and trusting the exiles, the infamous “Gucci Guerillas” from London. We bought into their intelligence reports. To the credit of the CIA, they didn’t buy into it, so I guess the Defense Department created its own boutique intelligence agency to vet them.*

*The seventh problem has been the lack of planning. I testified again during that period with the Senate Foreign Relations Committee, right behind the panel of planners from the State Department and the Department of Defense, and I listened to them describe a “plan.” I understood and knew that Gen. Franks and CENTCOM, would do their part. I knew damn right well the security piece would be taken care of, and I knew we had a good plan. I didn’t hear anything that told me that they had the scope of planning for the political reconstruction, the economic reconstruction, social reconstruction, the development of building of infrastructure for that country. And I think that lack of planning, that idea that you can do this by the seat of the pants, reconstruct a country, to make decisions on the fly, to beam in on the side that has to that political, economic, social other parts, just a handful of people at the last minute to be able to do it was patently ridiculous.*

*The eighth problem was the insufficiency of military forces on the ground. There were a lot more troops in my military plan for operations in Iraq. I know when that plan was presented, the secretary of defense said it was “old and stale.” It sounded pretty new and fresh to me, and looking back at it, now because there were a hell of a lot more troops. It was more the (Eric) Shinseki model that I think might have been a hell of a lot more effective to freeze the situation. Those extra divisions we had in there were not to defeat the Republican Guard, they were in there to freeze the security situation because we knew the chaos that would result once we uprooted an authoritarian regime like Saddam’s.*

*The ninth problem has been the ad hoc organization we threw in there. No one can tell me the Coalition Provisional Authority had any planning for its structure. *

*And that ad hoc organization has failed, leading to the tenth mistake, and that’s a series of bad decisions on the ground. De-Baathifying down to a point where you’ve alienated the Sunnis, where you have stopped having qualified people down in the ranks, people who don’t have blood on their hands, but know how to make the trains run on time.*

We are now at a point in history where Vice President Cheney and former DefSec Rumsfield and their apologists are saying that they would do everything all over again. At worst there is some grudging admission along the lines of ‘Who could have known’. Well I’ll tell you who knew. Four star Marine General Tony Zinni. There are some rumblings that he might be brought into the Obama Administration, but he hasn’t been retired long enough to legally serve as Secretary of Defense, which would be an ideal spot. But I suspect we have not heard the last of General Zinni.

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